DISCOMs Need Distribution System Operators To Forecast Renewables and Manage Load
Panelists at the Mercom India Solar Summit 2021 addressed the problems of DISCOMs
India is an attractive solar market with tremendous, long-term potential. The installation targets are aggressive; however, the investments in the sector have stymied due to counterparty credit risks from distribution companies.
DISCOMs owed ₹123.27 billion (~$1.68 billion) to renewable energy generators (excluding disputed amounts) in overdue payments across 227 pending invoices at the end of January 2021, according to the latest data.
The fourth session of the Mercom India Solar Summit 2021 focused on the power distribution companies (DISCOMs) and their key role in influencing policy.
The session was moderated by Mercom India’s Managing Director, Priya Sanjay. The panel included Manish Karna GM – Business Development, Energy, Adani Green Energy (AGEL); Anshuman Gupta, Manager, Indian Renewable Energy Development Agency (IREDA); and Manoj Kumar Agrawal Chief General Manager, Power System Operation Corporation (POSOCO).
Priya Sanjay directed the first question to Manoj Kumar Agrawal from POSOCO. “Power demand is critical for DISCOMs; however, solar developers find it difficult to forecast specific to certain sites as there are no weather monitoring stations in these areas to draw data. How does POSOCO plan to address the situation?”
According to Agrawal, the prime responsibility of forecasting lies with both the developers and DISCOMs. “The government has set an ambitious solar target, and to achieve the goal, we need several measures. We need flexibility in the conventional generation. We need to work on energy reserves as earlier we were facing generation shortage and now, we have a surplus. This is to sort out the variability and intermittency of renewable power generation. It requires proper forecasting and scheduling. We have 11 REMCs (Renewable Energy Management Centres) where three forecast service providers besides an internal forecasting tool as well.”
He added that several weather patterns are monitored whenever a solar park goes into development. “This information is available to the state and the developers, who can use their own forecasting tools or use ours. Currently, the deviation limit is 15% of the available capacity, and if the deviation falls within 15%, there would be no impact on the developer. If it exceeds, then the developer gets some compensation on deviation.”
According to Manish Karna from Adani Green, no developer wants to deviate from the standards and regulations meant to establish robust grid connectivity while addressing all safety concerns.
“However, I have one issue with forecasting during transient weather conditions (monsoon). Forecasting depends on weather inputs, and unfortunately, the weather forecast does not fall under the 15% deviation limit. There are errors in weather reports and pro-rata data from nearest IMD stations, especially when it is set up in a remote rural area. These errors are difficult to manage for the developers, like us, who have a full-fledged forecasting and scheduling team. However, in transient weather, our team is not able to track and forecast.”
Agrawal informed the panel that POSOCO had already signed an MoU (Memorandum of Understanding) with the IMD. The latter had already developed a portal for the power sector that can be accessed by any developer or DISCOM.
IREDA Short-Term Loans
Agrawal agreed that forecasts could never be accurate and there will be deviations, and the stipulated 15% deviation is much wider than the deviation laid out in the international solar sector.
Priya Sanjay asked IREDA manager Anshuman Gupta whether he expects the DISCOMs to pay back their loans.
According to Gupta, IREDA finances renewable energy power generation projects and transmission projects, and manufacturing projects. “Recently, we financed projects that will raise 2-3 GW of manufacturing capacity. We also finance DISCOMs. Now repayment of loans depends on how an institution structures and securitizes its loans. Some of our loans have state government guarantees, while for other projects, we devise other mechanisms. So far, we have sanctioned 10% of our book size as short-term loans to DISCOMs, and we have not seen a single default so far. These loans are short-term (2-3 years), unlike the long-term financing done by REC and PFC as they cover CAPEX too.”
Addressing DISCOMs Woes
According to Manish Karna, tariffs have multi-faceted dynamics, “When we ask DISCOMs to buy power tariffs, they will consider the demand of power in the next few years. The other facet is how much of that demand they are willing to allocate comes from renewables. When it comes to RPO (Renewable Purchase Obligation) compliance, we have already seen that it has been extremely poor. Around 70% of the DISCOMs compliance is less than 50%, Karnataka being the exception. There needs a to be a willingness to comply with RPO.”
Karna added that the APPC (Average Power Purchase Cost) of DISCOMs is ₹4 (~$0.053) while they are signing PPAs for less than ₹3 (~$0.40).
He said, “DISCOMs need to push for RPOs, the pull factor remains the tariff which will continue for 25 years and its cheaper than conventional power sources. So, it makes business sense to procure power from renewable energy sources. The solarization of agricultural pumps is another factor that will bring in more demand for the DISCOMs. The production-linked incentive program will push more manufacturing in India, which will drive the demand further. Besides, after COVID-19, demand from the grids has increased to 189 GW. With the summer setting in, the load demand will shoot up.”
He added that DISCOMs had enjoyed a long-time window when it comes to RPOs, and many regulatory bodies have waived cumulative RPO compliances instead of carrying them on.
Agrawal added, “At POSOCO, we have control of the national and state grids, and we are communicating with the state load dispatch centers (SLDCs). Despite Corona, we already hit the grid load of 189 GW, and it is expected to go up during summers to 210 GW. There is no distribution system operator for DISCOMs, the way we have SLDCs and RLDCs (Regional Load Dispatch Centres). Some private DISCOMs are working as system operators, too, as they are conducting forecasting activities also. Similarly, all DISCOMs should adopt proper load forecasting, data telemetry, and communication. Once a DISCOM has a complete visualization, they will be able to manage their load effectively.”
Agrawal said that he was very optimistic, although it is very difficult to integrate 450 GW by 2030 and 175 by 2022, especially with battery storage innovations.
Karna claimed that India would see a green grid by 2030. “However, I also feel that not many mergers and acquisitions are happening in the sector.”
Gupta, however, claimed that the market was consolidating, and in the next few years, the sector would attract huge investments.
Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.